NBA issue shows businesses operating in China must ‘be political’

The NBA’s initial response to the controversy in China demonstrates the lack of preparedness of many U.S. businesses that operate in the country, Dartmouth College’s Paul Argenti told CNBC on Wednesday.”It shows the lack of planning that goes into thinking about doing business in places like China, and I’ve seen this with lots of other companies before,” the Tuck School of Business professor said on “Power Lunch.” “You have to be political.”The NBA’s first statement said the reaction to Houston Rockets general manager Daryl Morey’s tweet supporting Hong Kong protesters, which set off the controversy, was “regrettable.”But it also affirmed the league’s support of people “sharing their views on matters important to them.””That’s more than most companies would do, but you could see they were trying to thread that needle — not really offend China, not really support [Morey],” said Argenti, a professor of corporate communication.”I think that’s the worst place to be,” he added, noting it is important to “come out strong.” “And what’s wrong with supporting freedom of speech, which is not really the only issue here. It seems like something that should be easy for the NBA to do.”NBA Commissioner Adam Silver released a second statement Tuesday that reiterated the league’s support for freedom of expression.The fallout for the league continues to deepen. Almost all of the NBA’s Chinese partners have publicly announced that they are ending or suspending their relationships with the league in the days since Morey sent his now-deleted tweet that read, “Fight for Freedom, Stand with Hong Kong.”Morey apologized, but it has not prevented backlash toward the league from mainland China.China is the NBA’s most important international market, and the league — like many other American companies since China opened its market to the world, in 1979 — has worked to establish a strong presence in the country.But China’s repressive regime — from media censorship to human rights abuses — presents challenges to businesses operating there, some argue.”You have to think about what your values are and what you’re willing to stand for,” Argenti said. “I think, for the most part, companies and a lot of individuals give lip service to freedom and freedom of speech, and then when push comes to shove, they do what is most expedient to make the money that is there in China.”But in this situation, the NBA is different than some other American companies who operate in China, Argenti said.”The NBA has an opportunity here because they have leverage and they are a very successful operation that China would like, so they should take advantage of that,” he said.Motus One CEO Mike Jackson, an expert in marketing and communication, said the NBA is well aware of the topics it should stay away from in order to not offend Chinese officials.Back when he was an executive at General Motors, Jackson said, some of those “taboo” areas would have been the Tiananmen Square Massacre and the country’s relationship with Tibet and Taiwan.”It would be safe to say that Hong Kong would be added to that list today,” he said on “Power Lunch.””It’s clearly important for companies to really understand that just the sheer amount of consumerism taking place in China represents a big opportunity,” Jackson said. “But the NBA is a lot more savvy and unfortunately Mr. Morey opened his mouth at the wrong time.”

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